"We find SC Lighthouse's method of ownership, while uncommon in the Town, does not constitute commercial use of the property," Chief Appellate Judge H. Bruce Williams wrote for the majority. "Only the owners and their guests ever use the property, and the owners do not pay to stay at their own property."
That sentence, from a February 18, 2026 opinion, is the entire reason Sullivan's Island real estate has been a topic of conversation in law offices and living rooms up and down the island this year. It's also the sentence most people quoting the case have not actually read past. The headline version, that a court sided with a fractional ownership company against a town that banned rentals decades ago, is true and also almost useless to a buyer trying to figure out what they can legally do with a Sullivan's Island property. The real story is narrower, more contested, and worth understanding before anyone treats this ruling as a workaround.
The case, briefly
In 2022, a company called 2 SC Lighthouse LLC bought a home on Sullivan's Island and began selling it in one-eighth shares through Pacaso, a company that packages fractional home co-ownership. Each of the eight owners pays Pacaso $99 a month for a scheduling app that coordinates who uses the house and when. Under the arrangement, only one co-owner and their guests occupy the property at a time, in blocks of two to fourteen nights per share. No one pays Pacaso or anyone else to stay there, and the home has never been listed on Airbnb, VRBO, or any other rental platform.
The Town's Zoning Administrator, Charles Drayton, decided that looked enough like a vacation rental to violate the town's vacation rental ordinance, which the town has enforced since 2001. The Board of Zoning Appeals agreed, voting 7-0 against Pacaso in early 2023. A circuit court affirmed that decision later that year. Pacaso and 2 SC Lighthouse, represented by Ross Appel, a Charleston City Councilman practicing at McCullough Khan, kept appealing, and on February 18, 2026 the South Carolina Court of Appeals reversed course in a 2-1 decision, case number 2026-UP-078. The court's reasoning came down to a single distinction: interpreting a zoning ordinance is a legal question, not a factual one owed deference, and under that legal reading, ownership without a landlord-tenant relationship and without payment for lodging simply does not fit the ordinance's definition of a vacation rental.
What the court actually leaned on
The opinion did not say fractional ownership is legal on Sullivan's Island as a category. It said this specific arrangement, built on this specific set of facts, escapes the ordinance. Those facts matter more than the outcome:
- Only one owner's household occupies the home at a time, never multiple parties simultaneously
- Stays run in blocks tied directly to ownership share, not nightly bookings
- The $99 monthly fee pays for coordination and upkeep, not the right to occupy the home
- The property has never been marketed on a short-term rental platform
- No one who isn't a titled owner or an owner's guest has ever stayed there
Change any one of those facts and a future case could land differently. This is also an unpublished opinion, which in South Carolina carries less precedential weight than a published one. A different property with a different management structure, more frequent turnover, or any hint of a booking fee tied to nightly use would be arguing a different case, not relying on a settled rule.
What changed and what stayed exactly the same
| Before February 2026 | After February 2026 | |
|---|---|---|
| Nightly rentals through Airbnb, VRBO, or similar platforms | Prohibited under the 2001 ordinance | Still prohibited |
| Selling stays for a fee, in any form | A zoning violation | Still a zoning violation |
| LLC-share co-ownership matching the exact Pacaso fact pattern | Zoning Administrator treated it as a violation | Court found it does not meet the ordinance's definition of commercial use |
| Whether the ruling is final | Not applicable | Unsettled at the time of the decision. The Town had the option to seek rehearing, and opposition voices publicly pushed for a state Supreme Court appeal. Confirm current status before relying on it |
For the overwhelming majority of people who own or are considering buying on Sullivan's Island, nothing in this ruling touches their situation. The island's ban on nightly rentals, in place since 2001 with narrow legacy exceptions for properties grandfathered in before the ordinance, has not moved. If a listing agent or a seller tells you a Sullivan's Island property can now be Airbnb'd because of "that court case," that is a misreading of what the court decided.
Why this wasn't the end of the story
In the days after the ruling, Sullivan's Island Town Administrator Joe Henderson declined to comment publicly on the outcome, noting that litigation was ongoing and that the Town had the option to petition for a rehearing. On the opposition side, Tim Emrich, who founded the Stop Pacaso campaign after the original 2022 dispute, was direct about wanting this to go further. He said the question deserved a definitive answer from the South Carolina Supreme Court and that he and other residents were urging the Town to appeal.
Whether the Town actually filed for rehearing, and how any petition was resolved, is not something a buyer should assume one way or the other from a February news cycle. Appellate timelines move on their own schedule, and an unpublished opinion decided 2-1, with a vocal opposition group pushing for higher review, is not the same thing as a settled rule you can build a five-year ownership plan around. Before treating this ruling as current law, confirm its status directly with the Town or through counsel who tracks the docket.
What this means if you're buying
Sullivan's Island's supply problem hasn't changed either. The island's fixed footprint, strict architectural review, and near-total absence of a conventional rental market keep inventory thin and demand steady, which is part of why fractional structures have surfaced there at all. As of March 5, 2026, 29 fractional-ownership listings were active across the Charleston-area MLS, and only a handful carried the Pacaso brand specifically. Fractional and interval ownership is not new to the broader Lowcountry, where it has existed in resort-adjacent communities for decades. What's new on Sullivan's Island is a court decision saying one particular version of it doesn't violate a rental ban that predates most current owners.
If a co-ownership structure is part of what you're evaluating, three things are worth doing before you sign anything. First, have your own real estate attorney review the exact terms of the ownership agreement and management contract against the facts the court relied on, not against the headline. Second, ask directly whether the Town has filed or intends to file for rehearing, since that status can change the calculus on a property you're about to close on. Third, treat any marketing that describes this ruling as a general legalization of fractional rentals on the island with real skepticism. The court drew a line, and it's thinner than it sounds.
None of this is legal advice. It's a summary of a contested zoning dispute whose final status was not confirmed as of this writing, and anyone considering a Sullivan's Island purchase built around this structure should have their own attorney review the current docket before relying on it.
FAQ
Does this ruling mean I can buy a fractional share on Sullivan's Island right now? It means one specific fractional structure was found not to violate the island's rental ordinance, based on facts unique to that property. It does not mean every co-ownership arrangement will be treated the same way, and the ruling itself may not be final.
Does this affect short-term rental rules anywhere else in the Lowcountry? No. This decision is specific to Sullivan's Island's ordinance and the Town of Sullivan's Island as a party. Other barrier island communities set their own rental rules independently.
What happens if the Town succeeds on rehearing or at the Supreme Court? If a higher review reversed the Court of Appeals, the original zoning violation finding against 2 SC Lighthouse and Pacaso could be reinstated, which would affect not just that property but the legal footing of any similar structure purchased in reliance on the current ruling. That possibility is exactly why timing and legal review matter here, and why the current docket status is worth confirming before you close.
Sullivan's Island rewards buyers who do their homework before they fall in love with a listing description. If you're weighing a purchase here, whether it involves a standard single-family home or a more complex ownership structure, Smith and Ryan Group can walk you through what a property's zoning history actually allows before you're under contract. Request a private tour or a complimentary home valuation to start with the facts specific to your address.
